Tuesday, October 12, 2010

Billions for War, But Not A Penny For Seniors.

As if voters don't have enough to be angry about this election year, the government is expected to announce this week that more than 58 million Social Security recipients will go through another year without an increase in their monthly benefits.

It would mark only the second year without an increase since automatic adjustments for inflation were adopted in 1975. The first year was this year.

"If you're the ruling party, this is not the sort of thing you want to have happening two weeks before an election," said Andrew Biggs, a former deputy commissioner at the Social Security Administration and now a resident scholar at the American Enterprise Institute.

The cost-of-living adjustments, or COLAs, are automatically set each year by an inflation measure that was adopted by Congress back in the 1970s. Based on inflation so far this year, the trustees who oversee Social Security project there will be no COLA for 2011.

This announcement about Social Security benefits raises more immediate concerns for older Americans whose savings and home values still haven't recovered from the financial collapse: Many haven't had a raise since January 2009, and they won't be getting one until at least January 2012.

"While people aren't getting COLAs they certainly feel like they're falling further and further behind, particularly in this economy," said David Certner, AARP's legislative policy director. "People are very reliant on Social Security as a major portion of their income and, quite frankly, they have counted on the COLA over the years."

Social Security was the primary source of income for 64 percent of retirees who got benefits in 2008, according to the Social Security Administration. A third relied on Social Security for at least 90 percent of their income.

A little more than 58.7 million people receive Social Security or Supplemental Security Income. The average Social Security benefit is about $1,072 a month.

Seniors prepared to cut back on everything from food to charitable donations to whiskey as word spread Monday that they will have to wait until at least 2012 to see their Social Security checks increase.

The government is expected to announce this week that more than 58 million Social Security recipients will go through a second straight year without an increase in monthly benefits. This year was the first without an increase since automatic adjustments for inflation started in 1975.

"I think it's disgusting," said Paul McNeil, 69, a retired state worker from Warwick, R.I., who said his food and utility costs have gone up, but his income has not. He lamented decisions by lawmakers that he said do not favor seniors.

"They've got this idea that they've got to save money and basically they want to take it out of the people that will give them the least resistance," he said.

Cost-of-living adjustments are automatically set by a measure adopted by Congress in the 1970s that orders raises based on the Consumer Price Index, which measures inflation. If inflation is negative, as in 2009 and 2010, payments remain unchanged.

Still, seniors like McNeil said they'll be thinking about the issue when they go to vote, and experts said the news comes at a bad time for Democrats already facing potentially big losses in November. Seniors are the most loyal of voters, and their support is especially important during midterm elections, when turnout is generally lower.

"If you're the ruling party, this is not the sort of thing you want to have happening two weeks before an election," said Andrew Biggs, a former deputy commissioner at the Social Security Administration and now a resident scholar at the American Enterprise Institute.

At St. Andrews Estates North, a Boca Raton retirement community, seniors largely took the news in stride, saying they don't blame Washington for the lack of an increase. Most are also collecting pensions or other income, but even so, they prepared to tighten their belts.

Bette Baldwin won't be able to travel or help her children as much. Dorcas Eppright will give less to charity. Jack Dawson will buy cheap whiskey instead of his beloved Canadian Club.

"For people who have worked their whole life and tried to scrimp and save and try to provide for themselves," said Baldwin, a 63-year-old retired teacher, "it's difficult to see that support system might not sustain you."

Baldwin and her husband mapped out their retirements, carefully calculating their income based on their pensions and Social Security checks. Trouble is, they expected an annual cost-of-living increase.

When we cut back, we're cutting back on niceties," Baldwin said. "But there are other people that don't have anything to cut back on. They're cutting back on food and shelter."

Many at St. Andrews said the cost-of-living decision won't affect who they vote for next month. But seniors tied the Social Security issue to what they see as a larger societal problem with debt, entitlements and hopefulness for the future.

"I'm kind of glad in a way," Stella Wehrly, an 86-year-old retired secretary, said of the freeze. "One thing depends on the other and when people aren't working there's not enough people feeding into the Social Security system."

Wehrly and her husband, Hank, said curtailing government spending is necessary to maintain the Social Security system.

"We have a generation now that we're not going to leave a very good legacy for," she said.

Jack Dawson, 77, said the freeze is the right move considering the state of the government and the American economy.

"Who would be surprised what's happened?" he asked. "I feel this is the right decision in light of the malaise."

More than 58.7 million people rely on Social Security checks that average $1,072 monthly. It was the primary source of income for 64 percent of retirees who got benefits in 2008; one-third relied on Social Security for at least 90 percent of their income.

At the Phoenix Knits yarn shop in Phoenix, 73-year-old owner Pat McCartney said she already worries about paying for utilities, groceries and gas. Not having the increase makes her worry even more.

"If I have any major expense, I don't know what I'll do," McCartney said while helping customers with their knitting. "I live on Social Security."

In Kansas City, Mo., Georgia Hollman, 80, said Social Security is her sole source of income. She would have liked a bigger check, but said she's grateful for what she gets.

"There isn't nothing I can do about it but live with it," she said. "Whatever they give us is what we have to take. I'm thankful we get that little bit."

"The existing COLA formula does not account for the economic reality of the true costs that most seniors faced," said Fernando Torres-Gil, director of UCLA's Center for Policy Research on Aging and the first person appointed to the governmental post of assistant secretary for aging, during the Clinton administration.

Still, Torres-Gil said the political reality is different, and many feel seniors are lucky to have their checks determined by the CPI, instead of some new formula that might make it even harder to secure a raise.

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